1.

OVERVIEW OF AUTO INDUSTRY

1.1 Current Status One of the major industrial sectors in India is the automobile sector. Subsequent to the liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian economy as this sector has witnessed tremendous growth. Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial licence is required for setting up of any unit for manufacture of automobiles except in some special cases. The norms for Foreign Investment and import of technology have also been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive. At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological upgradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is also allowed under automatic route in this sector. With the gradual liberalization of the automobile sector since 1991, the number of manufacturing facilities in India has grown progressively. The cumulative production of automobile for April-December 2011 registered a growth of 14.94 per cent over same period in 2010. Production in December 2011 increased by 10.91 per cent year-on-year. Automotive Industry comprises of automobile and auto component sectors and is one of the key drivers of the national economy as it provides large-scale employment, having a strong multiplier effect. Being one of the largest industries in India, this industry has been witnessing impressive growth during the last two decades. It has been able to restructure itself, absorb newer technology, align itself to the global developments and realize its potential. This has significantly increased automotive industry's contribution to overall industrial growth in the country.

Segment wise market share in 201011

16.70% 4.40% 4.40% Three Wheelers 74.40% Commercial Vehichles Passenger Vehichles Two Wheelers

The turnover of the auto component industry stood at Rs. 1821.27 billion (USD 39.9 billion) for the period April 2010 to March 2011, registering a growth of 34 per cent (in rupee terms) over the previous year. 1.2 Growth Drivers of Indian Automobile Market Rising industrial and agricultural output Rising per capita income Favourable demographic distribution with rising working population and middle class Urbanisation Increasing disposable incomes in rural agri-sector Availability of a variety of vehicle models meeting diverse needs and preferences Greater affordability of vehicles Easy finance schemes Favourable government policies Robust production 1.3 India's Position in World's Production Well-developed, globally competitive auto ancillary industry Established automobile testing and R&D centres Among one of the lowest cost producers of steel in the world Worlds second largest manufacturer of two wheelers Fifth largest manufacturer of commercial vehicles Manufactures largest number of tractors in the world Ninth largest car manufacturer in world India's growing Automobile Production
Automobile Production Trends Category 2004-05 2005-06 Passenger 1,209,876 1,309,300 Vehicles Commercial 353,703 391,083 Vehicles Three Wheelers 374,445 434,423 Two Wheelers 6,529,829 7,608,697 Grand Total 8,467,853 9,743,503 Source: Society of Indian Automobile Manufacturers 2006-07 1,545,223 519,982 556,126 8,466,666 11,087,997 2007-08 1,777,583 549,006 500,660 8,026,681 10,853,930 2008-09 1,838,593 416,870 497,020 8,419,792 11,172,275 2009-10 2,357,411 567,556 619,194 10,512,903 14,057,064 (Number of Vehicles) 2010-11 2,987,296 752,735 799,553 13,376,451 17,916,035

1.4

Domestic Sales Passenger car sales increased by 4.24 per cent to 1.946 million units (from 1.867 million units in 2010), two-wheeler sales by 16.22 per cent to 13 million units and three-wheeler sales by 4.74 per cent to 525,000 units For 2011-12, passenger cars sales are expected to grow at 0-2 per cent, two-wheelers at 13-15 per cent and commercial vehicles at 18-20 per cent. Overall automobile exports registered a growth rate of 28.97 per cent during AprilDecember 2011. Passenger Vehicles registered grew 18.14 per cent in this period while twowheelers, commercial vehicles and three wheelers segments recorded growth of 29.75 per cent, 24.66 per cent and 42.63 per cent respectively

Automobile Domestic Sales Trends

Category 2004-05 2005-06 2006-07 Passenger 1,061,572 1,143,076 1,379,979 Vehicles Commercial 318,430 351,041 467,765 Vehicles Three 307,862 359,920 403,910 Wheelers Two Wheelers 6,209,765 7,052,391 7,872,334 Grand Total 7,897,629 8,906,428 10,123,988 Source: Society of Indian Automobile Manufacturers

2007-08 1,549,882 490,494 364,781 7,249,278 9,654,435

2008-09 1,552,703 384,194 349,727 7,437,619 9,724,243

2009-10 1,951,333 532,721 440,392 9,370,951 12,295,397

(Number of Vehicles) 2010-11 2,520,421 676,408 526,022 11,790,305 15,513,156

1.5

Exports In 2010 (April-August), overall automobile exports registered a growth rate of 48.42 percent. Passenger vehicles, two wheelers, commercial vehicles and three wheelers segments grew by 5.07 percent, 56.71 percent, 91.51 percent and 114.86 percent respectively in 2010 (April-August) over 2009 (April-August).

Automobile Export Trends Category 2004-05 2005-06 Passenger 166,402 175,572 Vehicles Commercial 29,940 40,600 Vehicles Three 66,795 76,881 Wheelers Two Wheelers 366,407 513,169 Grand Total 629,544 806,222 Source: Society of Indian Automobile Manufacturers 2006-07 198,452 49,537 143,896 619,644 1,011,529 2007-08 218,401 58,994 141,225 819,713 1,238,333 2008-09 335,729 42,625 148,066 1,004,174 1,530,594 2009-10 446,145 45,009 173,214 1,140,058 1,804,426

(Number of Vehicles) 2010-11 453,479 76,297 269,967 1,539,590 2,339,333